Should you consider opting for a credit card EMI? With the wide range of benefits and convenience that credit cards offer, it is no wonder many people are turning to this payment option frequently. However, before you jump in, it is helpful to consider some essential factors.
This post guides selecting a credit card EMI to help individuals make informed financial decisions.
How Does a Credit Card EMI Work?
Using EMI on a credit card can be helpful and easy, but using it in certain situations is recommended. EMIs prove incredibly convenient when you are planning to buy an expensive item such as a high-end laptop, latest smartphone, or anything that has captured your attention lately.
During holiday shopping, you may have spent too much on your credit cards, resulting in debt. The interest rates can be as high as 36%-40% per year, which can be stressful. But do not worry! By choosing the EMI option for your card balance, you can reduce the interest rate to a more manageable 17%-18% per year. It means cutting the interest in half!
What Factors Should be Remembered When Opting for Credit Card EMI?
If you are considering a credit card EMI option, here are a few factors that need to be considered:
- Cashback points loss
Credit card companies do not usually give rewards for EMI options. So, if this loss affects your savings, consider using a different payment option for your credit card.
The bank will increase your credit limit by the same amount as your monthly payment. Banks may also offer a loan on your card if you qualify. It is an excellent way to pay off the card balance without affecting your spending ability.
- Financial stability
You must consistently evaluate your financial stability and ability to make EMI payments throughout the chosen tenure. Failing to make EMI payments can result in higher interest rates, penalties, and a lower credit score.
- Interest rates
Credit card EMIs can make purchases more expensive due to higher interest rates. You must only opt for EMI conversion when necessary.
- Credit limit
Converting a purchase into monthly instalments may use up some of your credit limit until the payment period ends. It could impact your ability to make expensive purchases during that time. You must ensure sufficient credit on your card, preferably equal to or greater than the amount you want to convert into EMIs.
- No-cost EMI options
Certain credit cards offer Cost EMI choices. It means the credit card issuer or merchant pays the interest, so the cardholder does not have to. Make sure your credit card has this feature and if it applies to your purchases.
- Prepaid options
Some credit card companies let you pay monthly instalments in advance without fees. If you want to pay your instalment early, it can help save on interest.
- Processing fees
Converting a transaction into EMI incurs a small processing fee against each Rs 1000 to be converted. You must consider these charges when calculating the total EMI cost.
- Suitable tenure
Credit card companies often give lower interest rates for longer periods. But before choosing a more extended period, you must calculate your monthly payments first. A longer period means you will have to pay more interest on the loan, so ensure you are okay with that before selecting a payment plan.
Selecting the ideal credit card EMI option requires thoughtful evaluation of key factors. You must gauge your monthly repayment capacity based on their financial state. Researching various issuers and their EMI plans while considering terms, hidden charges, and credit cards without income proof is vital for securing the right fit.
Considering the above mentioned factors, you can confidently opt for a credit card EMI plan that aligns with your financial aspirations.